Is this legal?

KIDS modified

Anne’s smart. Sold her house at the top. Took the money, dumped it into good ETFs and lets the returns pay the rent. “I’ve maxed my out my TFSA and the remainder is in my investment account,” she says. “However, I am a single mother and have three children over the age of 18.”

So, Ann smells an opportunity.

“My plan,” she tells me, “is to give money to my children to invest in their TFSAs to reduce my taxes from the regular account. Eventually I would be able to transfer all my money from the taxable margin account into the four TFSAs (mine, and my three children). This would send my taxable income to zero and allow me to claim the maximum from CPP etc. From what I have read, gifting between family members is tax free in Canada, so when I need the income from their TFSAs they should be able to withdraw it and give it back to me. This also helps with estate planning as if anything were to happen to me a portion of my money will already be in my children’s accounts. Essentially I am planning to give money to my children for them to invest tax free and they in turn will pay for my retirement.

“My question is: Is this legal?”

Told you she was wily. And the answer appears to be yes, although many are convinced it runs afoul of anti-avoidance rules (GAAR) . In this case Anne gives each kid at least $5,000 for every year they were 18 or over, then another $22,000 on Friday when we get the 2015 contribution room. If little Joe Owe does what I believe he will in this winter’s federal budget, next January Anne can move another $40,000 from her non-registered investment account into the totally tax-free environment of the four TFSAs. It wouldn’t take long at that rate for hundreds of thousands to be split between accounts, throwing off income that will never be taxed.

Here are some things to remember when considering this mother of an asset-splitting, tax-decimating, retirement-pumping, clawback-defying, controversial strategy.

First, yes, gifts to kids aren’t taxed. But you can’t just dump money into junior’s TFSA. Instead the funds must be gifted in the form of cash, a cheque, money order etc. If the brat takes PayPal, that works, too. Then the child has to open the TFSA in their own name (providing their SIN), make the deposit and invest the funds.

You cannot use contributions in kind, either, like you can with moving existing assets you own into your own TFSA. So, exchange-traded funds that Anne holds most be sold, then the cash passed on. If there are capital gains involved, she’ll be taxed on them. Capital losses on some can be used against gains on others, or stored for tax reduction in future years.

Each year the kids can sell growing assets within their plans, or take income spun off in the form of distributions or dividends, and give it to Mom to pay the rent. No tax, of course. And in each successive year, if they’re earning income themselves, for example, the withdrawals from the previous year can be replaced, along with new annual contributions made.

By the way, $22,000 a year going into these four TFSAs earning 7% in a nicely-run balanced ETF portfolio would give a total nestegg of $347,000, or which $105,000 is taxless growth after a decade. If this went on for 20 years, the total would be one used Kia less than a million dollars. Of that, $525,000 would be tax-free profit.

And all of this potential income going to Anne would be non-reportable. In other words, none of it would need to be declared on her tax return, meaning on paper she’d be destitute enough to collect her CPP payment, the public pogey OAS and maybe that hardship cash called the GIS intended for the poor (making about $17,000 or less). Is it fair a women with a million bucks in investments within her family and an income stream of seventy grand or so pays absolutely no tax and collects two thousand a month in government benefits?

Of course not. But TFSAs help make regular people rich, and rich people richer. Too bad 80% of all the deposits ever made into these things sit in cash or GICs. More proof this is a nation of financial illiterates.

Well, I should point out one fatal flaw for Anne. The very minute she gifts money to her kids to invest in their accounts, she no longer owns it. She cannot reclaim it. She can’t touch it. She’s not supposed to profit from it. If they decide to cash it in and buy Brad Lamb condos on the wrong side of the tracks in Calgary with 5% down, well, tough. This is why your children should always live in mortal fear of you.

Anyway, just two days until that sexy new TFSA room materializes. And you thought Christmas was a big deal. Pfft.


#1 TurnerNation on 12.30.14 at 6:46 pm

Least coast time?

#2 Derek R on 12.30.14 at 6:56 pm

Definitely least coast time. Wish I was there too.

#3 CPG on 12.30.14 at 6:57 pm

‘Growth’ narrative unraveling under delirious S&P 500 and Cdn banks

You read a financial blog called ‘Juggling Dynamite’? May God be with you. — Garth

#4 Smoking Man on 12.30.14 at 7:01 pm

My kids are rich but don’t know it.. all five of us are maxed.

Weren’t sure it was legal so never advertised. My accountant is a lush. Don’t know shit anymore.

I should fire the bastard, but I like him.. So this not so perfect dude gets the business.

Grasshoppers does this mean anything to you.

#5 active on 12.30.14 at 7:06 pm

smart plan for Anne, that is if her kids dont screw her over. kind of selfish for Anne to want to use her kids TFSA room..what about her children’s future? should she not be encouraging them to start saving for their retirement instead? Selfish little Anny.

#6 Smoking Man on 12.30.14 at 7:17 pm


#7 T.O. Bubble Boy on 12.30.14 at 7:21 pm

this is amazing… now, how can I speed up the aging on my kids to get them to 18 faster???

#8 Bob on 12.30.14 at 7:27 pm

Housing prices will rise in the next 10-20 years.

Make no mistake about that.

#9 Meh on 12.30.14 at 7:29 pm

I’m a lawyer, but I don’t do Tax law and won’t pretend to know its intricacies.

However I do know that while tax avoidance is perfectly legal, tax evasion is not. It seems to me that these are not “gifts” but the depositing of her money into the TFSAs of others, her children. The children then are holding that money FOR HER in a constructive trust from my perspective and the intention is to give that money back to her later on with interest.

I seriously question the legality of that.

#10 Rob on 12.30.14 at 7:31 pm

It’s a known fact that lending $$$ between family members is often hazardous. Truthfully do you really think that using this “gifting strategy” will – in the majority of cases – be any more successful – over the long run? No kid lives in mortal fear of their parents. Often it’s the reverse.

#11 Freedom First on 12.30.14 at 7:32 pm

I would never do what Anne is planning on doing. I have talked with too many lawyers I know personally over the years. From what the lawyers have told me, as well as what I have personally seen there is only 1 conclusion a freedom first individual like myself can come to. When it comes to money being involved people , loved ones or not, are capable of making your worst nightmares come true in any financial situation. As I have said before, I accept full responsibility for everything I say and do in my life, and gladly. However, keeping in mind I help people and think that is #2 in importance in my life, I do not put myself in a position to be financially vulnerable to what someone else will do. No exception. This idea is akin to co-signing a loan, which is foolish. No exception. Ever.

#12 Matt on 12.30.14 at 7:34 pm

Could Anne use a family 1% loan to keep in control of the principal at least? That is, if she trusts her kids as little as I would

#13 crowdedelevatorfartz on 12.30.14 at 7:35 pm

Geez, first RESP’s and now TFSA “gifting” to the runny nosed little curmudgeons.
Almost makes me wish I had kids……….
Nah, changed my mind.

#14 gardenmaven on 12.30.14 at 7:44 pm

Hasn’t she read all those stories about kids absconding with parents money? Wouldn’t touch an idea like this ever.

#15 mishuko on 12.30.14 at 7:50 pm

ingenious… my friend’s dad does this for him too… except he has a clause for his son (it’s his to use) it must sit there to appreciate but it cannot be used for non-essential stuff like a sports car or such.

Hey SM I’m young grasshopper looking to get into the asset management side of things… this custodian stuff I’m doing now is eh and I want to make money… by making YOU money.

#16 The Good Scientist on 12.30.14 at 7:51 pm

Can I presume that this is also perfectly legal to do between common law partners?

#17 Bytor the Snow Dog on 12.30.14 at 7:53 pm

My father hung me on a hook once.


I hope she can trust her kids to do the right thing when the time comes.

#18 Done by Forty on 12.30.14 at 7:59 pm

That last bit about control is the rub. Gifted funds are just that: the recipient might have different ideas on what to do with that gift.

#19 not 1st on 12.30.14 at 8:01 pm

I think gifting your kids a down payment for a condo and then living with them is a much better strategy.

#20 HD on 12.30.14 at 8:02 pm

#10 Freedom First on 12.30.14 at 7:32 pm

I do not put myself in a position to be financially vulnerable to what someone else will do. No exception. This idea is akin to co-signing a loan, which is foolish. No exception. Ever.

Wholeheartedly agree.

This plan would never work in my case. My brother would find a way to screw the entire thing up. The man cannot be trusted with money. Sad but true.



#21 not 1st on 12.30.14 at 8:03 pm

Is it fair a women with a million bucks in investments within her family and an income stream of seventy grand or so pays absolutely no tax and collects two thousand a month in government benefits?


Few people know but you can earn a lot more than that tax free if you set up your finances right.

#22 slo mo on 12.30.14 at 8:04 pm

Pretty sure revenue Canada will have a problem with this… lol

#23 not 1st on 12.30.14 at 8:07 pm

Eventually those ‘kids’ become adults who do stupid sh*t and may eventually need that money to bail their own ass out one day.

Even if they stay on the straight and narrow, eventually they get married and then that TFSA is co-owned by the news spouse who might not like thousands a year in un earned income going to their deadbeat MIL.

#24 will on 12.30.14 at 8:10 pm

Again Garth, what makes you so sure the TFSA limit will rise to $10,000? What economic indicators are on your radar that are not on mine? Or is it a political indicator? (Election year?). I’ll be happy if we get it but if it’s a political thing it doesn’t matter to me. I will not be voting for that fraud harper. As I’ve commented so many times here before I wish we had a conservative government instead of the liberals currently occupying the office of the prime minister.

It has nothing too with economics. — Garth

#25 danforth2 on 12.30.14 at 8:11 pm

Depending on ages and income levels, it would be a shame for adult children with jobs and incomes which allow them to invest, to not have all their accumulated TFSA room available to them. Mom would need to clear out her moneys so the kids can use that same room for their own investments.
Conceptually, TFSA room is a personal birthright…it’s not for others to use.

#26 Ketch on 12.30.14 at 8:14 pm

Anne Anne Anne say goodbye to your money. They will eat you alive.

#27 Victoria Real Estate Update on 12.30.14 at 8:25 pm

On December 11, 2014 I posted this chart on Garth’s blog (comment # 60).

. . . . . . . . . . .Victoria House Prices. . . . . . . . . . . . . . .
. . . . . . . . (Compared To October 2007). . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+13%. . . . . . . . . . . .x . . . . . . . . . . . . . . . . . . . . . . .
+12%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+11%. . . . . . . . . . . . . . .*. . . . . . . . . . . . . . . . . . . .
+10%. . . . . . . . . . . . . . . . . . . *. . . . . . . . . . . . . . . .
+ 9%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 8%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 7%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 6%. . . . . . . . . . *. . . . . . . . . . . . . . . . . . . . . . . . .
+ 5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 4%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 3%. . . . . . *. . . . . . . . . . . . . . . . .*. . . . *. . . . . . .
+ 2%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
..0%. . .*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*. . .
. . . . .Oct. . Oct. . Oct. . Oct. . Oct. . Oct. . Oct. . Oct. .
. . . . . 07. . .08. . . 09. . . 10. . .11. . . 12. . . 13. . .14. .

x = peak (June 2010)

(source: Brookfield’s index)

This chart shows that October 2014 prices in Victoria were lower than they were in October 2007 and that we would have to go back to 2006 to see prices this low in October. (link)

Brookfield’s October 2014 price chart also clearly indicated that prices in Victoria were:
* down 3.58% year-over-year
(October 2013 index level = 145.4, October 2014 index level = 140.2)
* down 0.71% month-over-month
(September 2014 index level = 141.2, October 2014 index level = 140.2)
* down 3.18% year-to-date (since the end of 2013)
(December 2013 index level = 144.8, October 2014 index level = 140.2)
* lower than in any month since August 2007 (even lower than 2009’s lowest point)

I had documented this data several times and know of others who had done the same.

Brookfield released their November 2014 price chart approximately one week after I posted this chart on Garth’s blog. The following is what I have observed:

Victoria’s monthly index price levels (October 2013 to October 2014 inclusive):

. . . . . . . . . . . . .(on December 11, 2014). . . . . .(now)
October 2013. . . . . . . . . 145.4. . . . . . . . . . . . .145.4
November 2013. . . . . . . . 145.6. . . . . . . . . . . . 145.6
December 2013. . . . . . . . 144.8. . . . . . . . . . . . 144.8
January 2014. . . . . . . . . .143.6. . . . . . . . . . . . 143.6
February 2014. . . . . . . . . 142.8. . . . . . . . . . . . 143
March 2014. . . . . . . . . . . 142. . . . . . . . . . . . . 142.2
April 2014. . . . . . . . . . . . 141.6. . . . . . . . . . . . 142
May 2014. . . . . . . . . . . . 141.8. . . . . . . . . . . . 142.4
June 2014. . . . . . . . . . . . 142.4. . . . . . . . . . . . 143.4
July 2014. . . . . . . . . . . . .143. . . . . . . . . . . . . 144.4
August 2014. . . . . . . . . . .142.4. . . . . . . . . . . . 144.6
September 2014. . . . . . . . 141.2. . . . . . . . . . . . 144.4
October 2014. . . . . . . . . . 140.2. . . . . . . . . . . . 144.6

The peak has remained the same at 160.2 in June 2010.

In recent months I had posted other price charts that were put together using Brookfield’s price data for Victoria, each time drawing information directly from their site. Using the information from the charts I have made, it would be easy to back generate the original monthly price levels that were used to make the charts.

(comment #51), posted on Dec. 4, 2014.
(comment #71), posted on Nov. 20, 2014
(comment #62), posted on Nov. 13, 2014
(comment #26), posted on Nov. 6, 2014
(comment #60), posted on Oct. 30, 2014
(comment #14), posted on Oct. 23, 2014

#28 FormerSaskie on 12.30.14 at 8:28 pm

Anne is completely selfish. Her kids need to be investing their TFSA room for their own future. Garth estimates that the total will be a million bucks, which will generate about $100 grand per year FOR Anne. She and her kids could all be in retirement at the same time, given modern longevity, but the kids gave Anne their TFSA room so they don’t have that income. Too bad for them!

#29 Washed Up Lawyer on 12.30.14 at 8:31 pm


Fraught with peril. Now, freshen my retainer and I will tell you why.


#30 I'm stupid on 12.30.14 at 8:33 pm

I have full control of my moms accounts, and both my brothers accounts. I could steal everything and make out like a bandit but I would never think of doing it. All I would need to do is ask and they’ll gladly give me what I want. The problem is pride, to ask means I’ve failed.

Back to Annie would the kids steal her money? I doubt it, because Annie probably loves her kids unconditionally and it isn’t easy to look at someone you screwed over in the eyes afterwards.

#31 olderthanaboomer on 12.30.14 at 8:35 pm

Wonder if the PMO monitors this blog? If so, heads will be exploding at Finance tomorrow!
Garth is correct, it is legal. But fair to the Hard Working Taxpayers? Not so much.

#32 Helen on 12.30.14 at 8:38 pm

Looks good on paper, but it doesn’t take the lives of her children into account. Terrible idea.

#33 Victor V on 12.30.14 at 8:39 pm

#23 will

Your voting intention is not the issue. The CPC made a pledge to double the TFSA and their political base is expecting them to keep their promise now that we are in surplus.

It will happen.

#34 danforth2 on 12.30.14 at 8:41 pm

Let’s not forget one positive byproduct of this. If Mom pulls her money out before the adult kids need the room, then the kids benefit from the growth that moms money generated in that it is free room.
So far the personal max contribution is 31k. Yet many people are sitting with 40k TFSA balances. That’s 9k of free room due to growth which if withdrawn, can be recontributed later.

#35 Helen on 12.30.14 at 8:42 pm

Seriously, your children are adults. They get married. To people with problems. Problems they’ll try to fix with “your” money. So many ways this could go wrong…

#36 Spectacle on 12.30.14 at 8:51 pm

Wow, and you provide an excellent story today Mr. Turner !

Also, kudos to #26 Victoria Real Estate Update on 12.30.14 at 8:25 pm.

I greatly appreciate Your Personal effort and input into this blog. I read as much as I can, including ” links” etc here.

Regards to All

#37 The Patient on 12.30.14 at 8:59 pm

A single mother of three playing the market (albeit within a balanced, diversified yada yada) with a margin account?

Yep, no red flags there…

#38 Mr. Frugal on 12.30.14 at 9:14 pm

This is a great plan. But, what happens when one of the kids marriage fails and a disgruntled spouse runs off with half of the money including the TFSA which Ann funded? I think is a brilliant plan if you are retired and loaded and looking for a way to transfer wealth to your kids. But I wouldn’t plan on getting any of it back.

#39 not 1st on 12.30.14 at 9:20 pm

I wonder which demographic has the most money in their TFSAs?

If its the boomers and older, its totally safe, no matter what happens in the economy. If its Gen X and younger you can count on the govt tapping those accounts one day to pay for the foggies who will still be voting in large numbers even while they are slurping jello.

#40 Happy Renting on 12.30.14 at 9:23 pm

None of us knows Anne’s kids except Anne, but generally speaking that fatal flaw makes this risky as hell. Kids can walk with that gifted money and convince themselves they’re not screwing mom over, they’re entitled to it. “She has so much money, why shouldn’t I get some?” Or, “she took my TFSA room, so she owes me.” Or, “sorry, it needed to be liquidated to settle my divorce.” How many adult children today are getting propped up, somehow, by the Bank of Mom and Dad? Do they all consider that shelter and help repayable loans?

Anne, if you’re really in love with getting all that free government pogey and paying no tax (that does sound tasty), run the numbers to see how long the scheme has to work for you to break even if one, two, or all the kids walk with your money. Then run the numbers to see how long it has to work if the pogey becomes means-tested and you don’t qualify (your age isn’t provided in the post, so this may happen before you’re old enough to belly up to the counter with your hand out.) Make a decision including the possibility of a worst-case scenario.

#41 waiting on the west coast on 12.30.14 at 9:28 pm

Victoria Update – again – thanks for the ongoing work and clarity!

Hey – this came out pre-xmas but just in case I missed it (and many of you)… check out what one of the most expensive lots in Vancouver can get you in France (note – you get all 9 properties for the price of the one tear down in Van).

#42 Brian on 12.30.14 at 9:29 pm

For anyone who hasn’t figured out the problem with this strategy yet, it boils down to control. At face value it works, you can give a gift to a spouse or adult child with no attribution provided the property is invested in the TFSA.

But for Anne’s strategy to work, she needs to either place a lot of faith in her children, child’s spouse/marriage, and investment strategy OR exert some level of control; in which case, it is questionable whether it was in-fact a gift, or part of a tax-avoidance scheme. This is why this strategy has GAAR written all over it.

#43 daivey on 12.30.14 at 9:31 pm

Paper theories be damned this is Garth Turner!

Obviously the children will be enslaved by their mother and will never wrong her investment account!

#44 Larry1 on 12.30.14 at 9:36 pm

Is this legal?”

Same thing the kids will be asking when the liquidate the TFSA to buy a new ski-do, car, boat, or motorcycle. I’ve known trust fund kids, now there’s TFSA kids I guess.

#45 Piccaso on 12.30.14 at 9:40 pm

US oil rigs are shutting down like crazy

#46 tkid on 12.30.14 at 9:42 pm

Greed is the downfall of many a retirement:

1. If the kids marry and then divorce, those TFSAs become property of the divorce settlement and could wind up in the bank account of the significant other.

2. If the kids die, the TFSAs go to their estate.

3. The kids need that TFSA room for their own retirement/financial planning.

Mom is banking on getting the money back from her kids just so she can get 5 to 6 thou extra from the government. I’d answer differently if Mom wanted to help her children avoid paying some estate tax, but Mom thinks she’s going to get up to financial skulduggery (greed). And what in hell will she do if she attempts to get the money back and the kids refuse? Sue ’em?

Will she try to convince a judge she was a no good liar when she filled out the gift forms and gave ’em to Revenue Canada? And will a judge see things her way? Will Revenue Canada see things her way?

#47 Piccaso on 12.30.14 at 9:43 pm

#37 not 1st on 12.30.14 at 9:20 pm

I wonder which demographic has the most money in their TFSAs?

Well the ones that can afford it, most are living pay cheque to pay cheque

#48 KJ on 12.30.14 at 9:46 pm

This is not legal and I don’t know what you had to smoke to think it was. Sure legit gifts are, these clearly are not gifts. In actual fact ‘mom’ has given evidence of an apparent criminal conspiracy to evade taxes.

Using TFSAs to maximize tax-free investment room within a marriage or a nuclear family has been an acknowledged strategy on the part of major accounting firms since the vehicle was created. It is widespread despite, as I wrote, being unfair. If you would provide a CRA interpretation bulletin or ruling on this issue, I’d be happy to disseminate it. — Garth

#49 Joseph R. on 12.30.14 at 9:50 pm

#36 Mr. Frugal on 12.30.14 at 9:14 pm

Are TSFA protected, the same way RRSP are in a divorce?

#50 Nick on 12.30.14 at 9:53 pm

I’d say her kids should make sure their TFSA contributions don’t exceed their after tax income, lest CRA judge this as tax evasion.

#51 Piccaso on 12.30.14 at 9:58 pm

Anne’s TLSA

Tax Laundry Savings Account

#52 Sydneysider on 12.30.14 at 10:08 pm

Kids pay needless tax on their salaries to govt; govt gives parent a tax break in return. A great way for parents to sponge off their kids…and they don’t even realise it.

#53 Fred B on 12.30.14 at 10:11 pm

Greenspan tale on the American economy.

Look like he has lost his wood en tongue…

#54 Washed Up Lawyer on 12.30.14 at 10:15 pm

What is the relevance of the fact that the people holding her money for her are her children? If it passes the attribution tests, then you can march up and down your street doing it with your neighbours. “Gifts” of money to your neighbours are not taxable either. When Anne feels a bit insecure about the arrangement, she can “paper the deal”. Exhibit “A” for Canada Revenue Agency.


#55 Mr Big - Get a for the kids on 12.30.14 at 10:17 pm

Get a … for the boys….they can’t bring girls into an ETF – hahahahaha

isn’t rocket science…..

#56 Victor V on 12.30.14 at 10:20 pm

#46 Joseph R.

You can *choose* a beneficiary when setting up your TFSA.

For example, Anne’s kids could select their mother as the beneficiary in their respective TFSAs instead of their spouses.

#57 Montellino on 12.30.14 at 10:23 pm

Kids will buy Bitcoins…. so there goes that plan

But even if it works, few years down the road daughter/son in-law ought to screw it up because guess what their mother has been telling them to do.. get in on the condo game

#58 Pete on 12.30.14 at 10:42 pm

Remember Anne,
The rules can and will be changed at any time without any warning. Remember the ‘Income Trust’ fiasco with Paul Martin? Your plan, although workable and legal now, may be taken away from you later on, even through the use of ‘clawbacks’.
For example the long-standing rules about selling your principal residence and not having to pay capital gains tax on it if you lived in it for at least 6 months is slowly being changed into where the tax dept decides whether or not they think that you have deliberately speculated on a house for the purpose of making money even if it really is your principal residence.
All I’m saying is you should not let any pot of money get too big or stay for too long. It’s perfectly legal to move assets offshore once the tax (applicable at that time) has been paid on them. Financial diversification should include diversification of jurisdictions as well as financial instruments.

#59 Totalchaos on 12.30.14 at 10:45 pm

If Anne is so good with money, why don’t her kids have TFSAs already? We agreed to help our kids with post secondary on the condition that they fund their TFSAs. Kid 1 is 19 with 11K in her account. Kid 2 is tracking to do the same. Being a single parent, she might not be able to help, but taking their contribution room seems to be sending the wrong message. This may be legal but it’s bad parenting.

#60 MGTOW on 12.30.14 at 10:48 pm

Is it legal?

A woman is not married to a man, yet she divorces him and takes away half of his investment gain over the past 4 years, which includes the rise in value of his house and other real estate investments.

This is called COMMON LAW MARRIAGE in Canada.
(also called ‘Common law separation’.)

So if you have a long-time significant other who has been living with you for 2 to 3 years, she can take you to the courts and go after your savings and investments even though you never married her.


#61 TSFA just another tool to screw yourself on 12.30.14 at 10:59 pm

TSFA just another post-colonial govt (overly centralized) tool to self-boycott your future wealth)

it’s for kids not for rich

it splits your asset allocation to irrelevant mini levels, instead of cumulative millionaire-mind-set force of real estate

#62 Detalumis on 12.30.14 at 11:10 pm

#52, You don’t think that anybody that found out their spouse has put their mother as the beneficiary on their assets would not question it? A beneficiary means nothing until you die, at divorce the RRSP, TFSA and whatnot are still matrimonial assets, they don’t go to your beneficiary at divorce, “heaven ain’t ready for you yet”.

This lady is ridiculously self centered, she is risking her kids’ own retirement by using up their TFSA room and expecting to have the money returned. If I were her I would gift money that I could afford as a gift, you know what a gift is, I doubt she does. I wouldn’t worry about hitting OAS clawback, I would consider myself lucky that I reached that income level and was still alive and healthy enough to know what taxes were.

#63 McLatch on 12.30.14 at 11:18 pm

I don’t know how you do it almost every night delivering such great knowledge in such an entertaining manner FOR FREE!! And then to read what many readers opinions are about what you have written when they clearly don’t understand what you just said!

I would like you to know that I am truly thankful Mr Turner for the message you are spreading and am forever enriched because of it. I have been reading your blog since 2010 and should have thanked you sooner and more often. I think we need more people like you Mr Turner, our country would be much better off.


#64 Blacksheep on 12.30.14 at 11:20 pm

Based on the CRA’s displayed interest in over sized TFSA’s, giving Anne’s idea serious consideration seems pretty foolish.

#65 Waterloo Resident on 12.30.14 at 11:21 pm

I hope you know; with a TFSA you cannot invest in U.S. equities, that is the law.

Of course you can. But there are tax considerations. — Garth

#66 NoName on 12.30.14 at 11:40 pm

i am not sure did i get this right, but i doubt that i got it wrong!
So, moral of the story is if you are gen-x or younger you are and will be &^$# to oblivion by baby boomers. huh i feel lot better now…

@smoking man
as of Jan 1 i’ll need you to be my life coach (probono ofcourse)

good thing that we are not like, americans, we are so much better!

#67 Scotrand Russell on 12.30.14 at 11:45 pm

Well done Garth and Anne! I like the digging in to the tax details. How about a series with ‘Garth and Anne – Is this legal?’?

#68 Fred Smith on 12.30.14 at 11:58 pm

Where are you getting 7% in a low risk ETF? No such thing. There may be some that have done well lately because the stock market has been on a tear but you are not going to get that kind of return averaged out over years in anything that is low risk.

Sure you can put it into an oil stock (or oil ETF maybe if there is such a thing) right now and probably get a lot more than 7%. Does not mean it’s anything close to a sure thing over the long term.

I’m not advocating savings accounts or GIC’s either. There are some 3-5% dividend paying stocks out there that are quite safe from diviend cuts. Not 7% ETF’s. That sounds more like a unicorn to me.

#69 Holy Crap Wheres The Tyenol on 12.31.14 at 12:07 am

After just landing here in the great not so white north I have to say it feels pretty good to be back in Canada. I had a whole week in the sunny Bahamas with the family. We spent a lovely Christmas down there something different for a change. Many years ago for TFS A’s and any fancy investor manipulations of funds I sett children up with stocks in their names! They will get the stocks upon my dimise! Each one is already successful in their own careers and two have their own companies started! What I figured is the stocks should generate at least $250 k as for taxes what the hell I’ll be dead!

#70 prairie person on 12.31.14 at 12:11 am

Garth, you have emphasized what is likely to happen re the major centres of foolishness–Vancouver, TO and Calgary but my interests lie elsewhere. If prices fall in these three centres, if interest rates rise, if the banks become more choosy re mortgages, what happens outside of the major centres? Earlier, I posted a link to a house for sale, asking price, 800,000.00. Rural Manitoba and I mean rural. The countryside is dotted with houses one can only describe as mansions. Not prices like the big 3 but where do the Greater Fools come from to pay the asking prices for places like this? How illiquid might this market become?

#71 Andrew Woburn on 12.31.14 at 12:16 am

As a former tax advisor, based on what information is given here, I believe Ann is home free as long as she has no legally enforceable right to the income from the children’s TFSA. If she gives them money freely and they choose to give her money back of their own free will, that is a private matter.

However the moment they have to pay her, that is a different animal and would certainly invite an attack by CRA. Remember the first principle of effective tax enforcement is to hang some hapless miscreant high in the village square to discourage a million others. Ann doesn’t want to become that target.

Anyone who would enter into such an arrangement without an enforceable agreement is a dreamer. Apart from anything else already mentioned in previous comments, the children’s creditors could have rights to their TFSA accounts. To the best of my knowledge, only third party lenders can take security over TFSA assets so Ann cannot protect “her” assets.

In my view, the financial and personal relationship risks totally outweigh the somewhat marginal benefits of this scheme. There are cleaner ways to defer income for retirement such as borrowing to buy high quality REITS and deducting current interest costs.

#72 poundingsandinpeachland on 12.31.14 at 12:26 am

lovin’ the Bob #8

#73 RealistvsExtremist on 12.31.14 at 12:29 am

#52 Sydneysider on 12.30.14 at 10:08 pm
Kids pay needless tax on their salaries to govt; govt gives parent a tax break in return. A great way for parents to sponge off their kids…and they don’t even realise it.

Just wait until all these Public Sector workers go to retire over the next 5 years with their million dollar pensions and benefits and there is no cash to pay them. This is already starting to happen world wide and pensions are getting cut. Including the USA. But some people think it can’t happen here……

#74 4 AM Sunrise on 12.31.14 at 12:33 am

I learned a lot about sailing yesterday. Thank you so much for the anecdotes and the questions. Happy new year, everybody!

#75 Jon B on 12.31.14 at 12:39 am

All these rules to ensure everyone pays their fair share of taxes. Endless interpretations, schemes and strategies. Yet those who are in charge of spending the proceeds of taxation, so called “law-makers”, pillage the tax base with barely any accountability while supporting their pet projects, foreign wars and anything else that keeps them elected. Just imagine if the population put as much effort into keeping the crooks in Ottawa in line with how they spend national revenue as they do in keeping us in line on how we report it. Just imagine, because it will never happen.

#76 Rich on 12.31.14 at 12:45 am

Very helpful! We are all trying to avoid the tax man. But we should remember, paying taxes means we are making money. That truelly is a good thing. I will use the rules to my advantage as much as possible.

#77 nonplusedrodamous on 12.31.14 at 12:50 am

I foresee family strife ahead…. for someone named Ann perhaps. Money given and never returned. Accusations. Incriminations. All for the avoidance of taxes and the collection of excess government support. The gods smile on the foolish, and those they wish to destroy they first make proud and sneaky.

Nonplusedrodamous does not even have a family member listed as an executive for his will, choosing instead to pay a small fee to a lawyer who specialises in such things, seeing as it is so easy to forecast misuse of trust funds by less well off relatives. Can you really trust your broke sister to administer a million dollar trust fund on behalf of her nephew without either stealing the money or at the very least feeling quiet jealous? No you can’t.

Nonplusedrodamous’s father said some real crackers in his time, but the one that rang true for N. was this: “Never do business with relatives.” N. thinks that in the case of sneaky business it rings especially true. N. means if mom can rip off the government, why can’t junior rip off mom? The precious young children learn by example and not by words or coercion.

Nonplusedrodamous has seen terrible visions, so many families destroyed by greed and financial infighting over the slightest amounts of money. From parents favoring one child over another to children jockeying to gain a larger portion of the will.

Garth speaks a great misdirection. Children should never fear their parents, and generally the worse the parents treat them when they are young the less control they have over them when they are older. As the title of the book says, “If It’s Not One Thing, It’s Your Mother”.

Nonplusedrodamous also likes another phrase he has heard whispered amongst the stars: “You can catch more flies with honey than vinegar. But either way you’ve got flies.”

Thus ends the teachings of Nonplusedrodamous.

#78 Cici on 12.31.14 at 1:05 am

…Is it fair a women with a million bucks in investments within her family and an income stream of seventy grand or so pays absolutely no tax and collects two thousand a month in government benefits?

In my opinion, absolutely NOT. And this kind of tax avoidance will only help ensure that the country is eventually bankrupted, and bleed the poor.

I’m sorry, I get why people want to reduce tax, but you need to contribute something if you want to have a healthy, prosperous and well run nation with access to proper health care, shelter, infrastructure and social welfare FOR THOSE WHO NEED IT.

Personally, I find Anne’s greed revolting. She’s got a nice pile of cash and can definitely live well here and now while ensuring that her progeny are well taken care of without robbing the system and those who are in actual need.

I’m seriously disgusted by this post.

#79 nonplusedrodamous on 12.31.14 at 1:10 am

N. regrets his use of the word “control”. It should have been translated “influence”. N. is rusty on his Latin. those who would “control” their children will one day find their children controlling them.

Thus ends the editing of Nonplusedrodamous.

#80 Shrink on 12.31.14 at 1:22 am

Excepting special privileges or exempting oneself from social norms is often a potential sign of narcissistic personality disorder. I once knew a woman who would go through the odorous practice of changing her address every year so she could get free street parking near work and then change it back again immediately after, all to avoid paying $6 a day to park in the lot beside the building. And she wondered why she didn’t get many dates. She was a big party crasher too.

#81 Teulon on 12.31.14 at 2:03 am

#58 Pete
Income Trust demise in October 2006 was orchestrated by F under Harper – Paul Martin and the Liberals had zip to do with the decision.

#82 pravchaw on 12.31.14 at 2:35 am

I think this is a legitimate tax planning strategy. The kids have no room to in their TFSA, so its perfectly fine to park your money there. (it would be advisable to get a promissory note signed with the TFSA as collateral just in case the kid turns into a stoner).
Why is it any different from using a 79 yo grandma to get a life insurance policy on her which pays you tax free $$$ when she croaks?

#83 greg on 12.31.14 at 2:37 am

Garth can u give us the 2015 predictions? Tell us how everything is going to crash..bahahahaha rofl….l.

#84 Candy Crusher on 12.31.14 at 2:42 am

Love the theory…seen the pain. Nice idea….but what happens when the kids want to start a TFSA for themselves and Moms maxed it out? Human nature…even when loves the dickens out of the kids….has been known to interfere with the best of intentions.

Next…and I hate to be a bummer. But in my professional life I was in the middle of many contentious litigation family events where sons were suing mothers, brothers suing sisters, daughters suing moms……children ripping off elderly parents….hastening their untimely demise with maltreatment….kids turfing out mom after she buys a house with a granny suite downstairs….kids suing dead second husbands estates…..step kids suing adults they’d never met…adopted kids demanding more than their fair share….Brother…people can get downright ugly when it comes to money.

Hermano Garth…I’ve seen every ugly thing you can imagine when it comes to family squabbles. Seniors co-mingling assets with kids and an open candy jar is a very dangerous area of human nature that defies description….

#85 Lillooet, BC on 12.31.14 at 2:56 am

Yes, TFSAs are a great way to save and avoid paying taxes. Everyone should have one and buy conservative equities.

And yes, how long before the adult children of this generous mom realize the money gifted to them into their TFSAs doesn’t have to be paid back to mom and they can spend it however they want.

#86 Corban on 12.31.14 at 2:59 am

Thank-you for this tidbit. It sounds like a great plan. The nay-sayers here are being short sighted.

Using up the kids’ room in the TFSA? They obviously have nothing in their themselves.

Kids may run off with the money? We’re being altruistic and assuming that won’t happen, and….

Mom gets all the money? If we assume the mom is the kind of person who trusts her kids this much, then her kids are likely the kind of people who would end up financially support their mom if needed anyways.

She’s self-funding her needs, placing no additional burden on the kids, and at the end of the day, the kids keep what’s left at a dramatic tax advantage. What an awesome mom!

#87 elderberry on 12.31.14 at 3:05 am

Garth, what about the opposite scenario, can children of cash poor house rich boomers utilize the unused TFSA contribution room of their parents?

#88 a question for Garth T on 12.31.14 at 3:15 am

or stored for tax reduction in future years.

For how many years…i’d lost some dough 10 years ago and never claimed the loses…thanks Garth

#89 Turtle on 12.31.14 at 3:26 am

Bad idea.

I do my best … but my kids can do better. I am sure they are smarter than I am, so when I give them something… it is a gift, no strings attached.

My kids don’t owe me anything. They owe only to their own kids.

#90 Mark on 12.31.14 at 3:44 am

“TSFA just another post-colonial govt (overly centralized) tool to self-boycott your future wealth)

I’ve been arguing this as well, albeit without a lot of success here. The issue is, money that’s in the TFSA can sit in the relative safety of fixed income with a superior return. Hence, it shifts the risk/reward ratio for investors in favour of fixed income, and away from equity investment.

Additionally, you can’t leverage a TFSA directly. And the investments that can be put in a TFSA are limited to the rather narrow list of investments that the trustees and the government allow.

#91 Rabi Dmangycur on 12.31.14 at 4:44 am

Anne stumbled upon a Revenue Canada gift.
I read all the negative posts and shake my head.

#92 George S on 12.31.14 at 5:39 am

“If the brat takes PayPal, that works, too.”

Paypal has a fee similar to a credit card in that the payer doesn’t see it. I think at least 3% so be careful using it for large sums. I know you put it in as a joke but some might take it seriously.

#93 Growacet on 12.31.14 at 6:15 am

anything to do with keeping more money in your pocket is why I come here. I love this strategy!

#94 LessFatOil on 12.31.14 at 7:01 am

Hi Garth,

Since you are on the subject of TFSAs today, what do you think if we had an unofficial TFSA Contest? (MoneySense and Globe & Mail, have had contests and winners who grew a big TFSA).

Like in early January 2015, you could give your “picks” for ETF’s and the rest of us blog dogs could give our “picks” for ETFs, stocks, penny stocks, that we have or plan to buy in our own TFSAs.

Every quarter end (March, June, Sept), you could ask how we are doing. Then at the end of Dec. 2015, we dogs could blog how we did during the year.

It might be fun, and a learning experience. Foremost, we would learn a lot from your “picks”, and amused by our own “picks”.

Since we here are rather bearish on R/E for now, it would be fun and exciting to try to maximize our TFSA holdings. And fun to read about the blog dogs picks and performances.

There would be no prizes for the winners. The prize is for everyone to have fun.

Happy New Years Eve everyone.

#95 LessFatOil on 12.31.14 at 7:56 am

Garth, your blog today was ingenius, to say the least.

It got the wheels turning. Very inspiring.
You said most Canadians have prettywell, dormant TFSAs, with GICs doing nothing in them.

Well….come’on…Blog Dogs… if this guy in the MoneySense TFSA contest can grow his TFSA to $300k, why don’t we at least try as well? Are we not an eccentric, eclectic group here, with passion and ideas?

* * *
MoneySense had a TFSA Contest last year, the winner grew his TFSA to $300,000. See link below for all the winners, and if you click on their names, you can see what they put inside their TFSA last year.

Let’s be motivated, inspired, for 2015 year, and challenged beyond our wildest imagination, because we will certainly need it to do this. Godspeed.

#96 cory downton on 12.31.14 at 7:57 am

Cheap oil’s victims: Civeo slashes over 1K jobs

More than 1,000 employees at Civeo (CVEO), a provider of housing for oil workers, have lost their jobs in recent months. There’s concern this is only the beginning of the energy sector layoffs.

Civeo primarily houses people working in the Canadian oil sands industry, a previously red-hot area of the North American economy that relies on lofty oil prices to turn a profit.

#97 unbalanced on 12.31.14 at 8:00 am

Great writeup. BUT heres the catch. Sure, raise the TFSA to whatever. Eventually the Government sees whats going on. Hey, we need more money for the coffers. Lets slowly tax the TFSA some way or another. Might take five, ten, twenty years or whatever but whats the hurry. Face it. The government will and can do do anything it wants.

Unlikely. But every day the TFSA exists is another day you can earn tax-free gains. Why wouldn’t you? — Garth

#98 yorel on 12.31.14 at 8:59 am

As someone whose very sick wife is receiving incredible service from OHIP, I question not paying your taxes. I bet those people are very quick to use health services to the max.

#99 maxx on 12.31.14 at 9:36 am

All the very best for 2015, Garth and les dawgs!

May good health and great fortune smile upon everyone.

#100 jane24 on 12.31.14 at 9:57 am

I cannot believe how selfish this woman is!!!

Not only does a wealthy person want to reduce her legitimate tax bill and not pay her fair share, she also wants to rip off her own children so that they cannot make contributions themselves.

I hope that her kids empty the accounts as soon as she has set them up and have a great deal of fun with their/her money.

#101 Kenchie on 12.31.14 at 10:05 am

“It’s all over now, baby boomers”

#102 Renter's Revenge! on 12.31.14 at 10:09 am

70 prairie person on 12.31.14 at 12:11 am

“Rural Manitoba and I mean rural. The countryside is dotted with houses one can only describe as mansions. Not prices like the big 3 but where do the Greater Fools come from to pay the asking prices for places like this?”

Dude, there are a lot of people with more money than brains in Manitoba. You’d be surprised! Plus people are selling their houses in Winnipeg to move outside the city because “the property taxes are too high”.

#103 Nomad on 12.31.14 at 10:16 am

I think that any aggressive policy the Canadian government would make to seriously discourage canadians to take on less debt (although late) would loose them a lot of votes, since so many canadians have a lot to loose if the real-estate market melts.

Canadians want to keep waking up in the morning reading a new article in the Globe and Mail or Financial Post telling them the real-estate market is red hot. Those papers know it and keep reprinting that type of news.

So, I think they are making the best chess move to increase the TFSA contribution room. It’s simple and a tempting place to put your money.

When the market goes up those who have TFSA will say “Dude I made 5k this year and not 1 dollar of it is taxed.”. In 3 years people will say: “Houses on my street aren’t selling for more these days but our family TFSA is now at 120k and growing.”

#104 Nomad on 12.31.14 at 10:18 am

Oil just dropped to 52.60$.

If you rent and invest, please don’t panic and sell your ETFs if oil keeps dropping and brings the market down more than it did already. If you do, they you don’t have the risk tolerance and patience it takes to invest, and really, you should have bought a house.

#105 jimbob on 12.31.14 at 10:26 am

Thanks for every thing Garth doing a great job. Love reading your blog and the comments, has really helped, just retired and applied for cpp early, have lots of etfs and maxed out tfsa’s but trade a little too much, less trading next year is New Years resolution.

#106 Dupcheck on 12.31.14 at 10:43 am

The great recession was not as big as it was made to be.
Check out the logarithmic plot of the DOW.
It shows you the reality.

Time to buy more US equities…

#107 Smoking Man on 12.31.14 at 10:51 am

My call for 2015

Rates stay same
Toronto re up 5.2%
905 re Flat
Stocks will rise
Bonds will stay strong yields low
Syndicated Mortgage Strong.
Rebound in Oil.

I will finally publish my book. (I think)

#108 Bottoms_Up on 12.31.14 at 11:25 am

We forget that over 18 children are adults, that will soon be earning their own money. Is it fair that mommy usurps all their TFSA room? She should be teaching them how to invest their own money, for their own future.

Shame on mommy.

#109 luther on 12.31.14 at 11:27 am

Any prediction for 2015 Garth when is the housing crash going to happen?

#110 Bottoms_Up on 12.31.14 at 11:33 am

#82 pravchaw on 12.31.14 at 2:35 am
A 21 yr old ‘child’ may turn into a 24 yr old ‘earner’ making $60,000 per year. They will find out they have no TFSA room as mommy has taken it all for herself. What kind of message does that send? So the 24 yr old must then invest and pay tax because rich mommy doesn’t want to?

#111 Bottoms_Up on 12.31.14 at 11:36 am

#73 RealistvsExtremist on 12.31.14 at 12:29 am
Are you suggesting that someone who pays $200,000 into their pension over 35 years of work, plus matched by the employer, plus growth of those assets over 35 yrs, is not entitled to their million bucks?

#112 4 AM Sunrise on 12.31.14 at 11:56 am

This story is such a eye-opener. I see two major touchpoints in it:

1. The trust issue

It depends on how far over 18 those kids are and what life stage they’re in. Maybe they’re students, doomed to be basement-dwelling students for the next 10 years. Since I guess they’re Millennials, maybe they’re working poor and they can’t afford to move out. Or have they already moved out? Any of them headed for marriage? We can’t tell from the story.

Somebody mentioned something about how this could create a situation where the mother might have to sue her kids for the money she gives/lends them. I recently read some court documents where a mother lent her son and his wife $300K for “living expenses” and to renovate and flip a house. When the daughter-in-law filed for divorce, she claimed that the money was a gift. So the mother sued her son and his ex-wife for an interest in the house. The case was dismissed. I don’t have any details about how things were resolved (or not). Yeah, things can get that ugly.

2. The GAAR issue

When I first opened my TFSA, the nice guy at the brokerage said, “TFSA’s are great, because it’s like you can buy a junior mining stock, and if it increases tenfold, you don’t get taxed on the gain.” This is EXACTLY what happened to one lucky amateur: he took a big gamble on a junior uranium stock which turned out to be a ten-bagger, and now the CRA is investigating him. So I wouldn’t rule out the possibility of the CRA investigating Anne. We spent the last five years muddling our way through beneficiaries and withdrawals; maybe we’ll spend the next five figuring our way out around attribution.

#113 Rational Optimist on 12.31.14 at 12:07 pm

Anne, kudos to you for raising children that are obviously much more loyal and intelligent than the children the commenters here have raised.

A lot of insane jealousy posted in response to this question. I’m guessing not because of Anne’s money, but more so because of the trust she has with her family. “#30 I’m stupid compared to tomorrow’s me” is one of the only commenters that seems to enjoy a healthy relationship with his family. How can you profit if you don’t have that?

People conveniently missed the part where she talks about “estate planning.” This idea is a beautiful gift on Anne’s part that helps her entire family- what 18-year-old is in the position to contribute $5,500 a year to a TFSA? One day, the kids will have a TFSA that is fully-funded, or else has a significant amount in it, along with lots of extra contribution room created by the growth of Anne’s assets. That contribution room is tax-free possibility that the kids would never have had if Anne had been like the rest of this lot and told them to wait until they were 30 to start contributing with their “own money.” This is a complete win-win. This is the kind of thing that family is for.

#114 cramar on 12.31.14 at 12:08 pm

Anne’s idea is a possible, THEORETICALLY! Two main problems. As many mentioned, it will not work in practice because she is using THEIR TFSA for HER benefit. If they have any savvy, they will want their TFSA for their OWN use. The other issue is that it doesn’t take into account human nature. With three kids, one or more is likely to shaft her.

Reminds me of my former daughter-in-law (DIL). When my eldest son got married, everything was rosy. My wife “loaned” them a down payment for a house to be repaid in future with no paperwork (no need, it is “family”). A few years later, DIL split for greener pastures and got the house. When wife asked for money back, DIL says “What loan?”

Anne sounds like she is financially sharp. If she just continues on with living below her means and investing wisely, in time she will be wealthy enough to not need to use her offspring in a selfish scheme to scam the pension system.

#115 Rational Optimist on 12.31.14 at 12:14 pm

78 Cici on 12.31.14 at 1:05 am

“…you need to contribute something if you want to have a healthy, prosperous and well run nation with access to proper health care, shelter, infrastructure and social welfare FOR THOSE WHO NEED IT.”

I agree strongly with that. How much is the something that you need to contribute? Some people, when you ask them ‘how much should we give?’ they only answer “More, more, more.”

A humble person might understand that he lacks understanding about the complexity of the costs of our social society, and look to the laws to see what his fair share is. Why would he pay more than what the rules, based on consensus, tell him is his fair share?

I don’t think Anne’s greedy at all. She’s trying to maintain a certain quality of life for herself and her kids. She wants to make sure that what she proposes is within the law. Where’s the greed?

#116 Bottoms_Up on 12.31.14 at 12:18 pm

#65 Waterloo Resident on 12.30.14 at 11:21 pm
I believe the US withholds 50% of any dividend. But you can fill out a form that reduces that amount (to 25%?).

#117 Bottoms_Up on 12.31.14 at 12:21 pm

#68 Fred Smith on 12.30.14 at 11:58 pm
In your comment you confirm you can indeed pick up good stocks that pay 3-5% dividends.

It’s not a far stretch to realize that a total yearly return of 7% can therefore be had (3% dividend plus 4% appreciation, compounded year over year).

#118 Bottoms_Up on 12.31.14 at 12:29 pm

#45 Piccaso on 12.30.14 at 9:40 pm
actually they’re not shutting down like crazy, if you actually read the article and not the headline. Rig closures are happening at about 1-2% per week, and total US rigs in operation are still fairly near all-time highs.

#119 Bottoms_Up on 12.31.14 at 12:34 pm

#113 Rational Optimist on 12.31.14 at 12:07 pm
Don’t you think a wiser move as a parent would be to teach your children to live below their means, and regularly contribute to their own TFSA? Instead of treating them like trust-fund kids and using their TFSA (‘birthright’) room for your own benefit?

#120 Suede on 12.31.14 at 12:42 pm

I’m starting a GreaterFool ETF


60% Equities
30% War Bonds
5% REITS or Mouldy Basement Lairs for Rent
5% Precious Metals so the metalheadbangers can feel like they’re included

I need people’s unused TFSA contribution room so this can grow tax free. I have a contract to sign saying you will gift me back the growing TFSA in 5, 10 or 20 years fyi.

#121 Snowboid on 12.31.14 at 12:51 pm

Thank you Canada for sharing your arctic air with us snowboids down in Phoenix. Kinda reminds of us what we are missing.

Thank you professor, for the wisdom that freed us from our McMansion bonds, and allowed us to live a retirement lifestyle we only dreamt about a few years back.

To you and all the posters, a Happy and Prosperous New Year!

P.S. Local gas station prices today – .57 CAD a litre!

#122 Forgot the Name on 12.31.14 at 12:57 pm

I Agree with CiCi #78…

It is bad enough that a working person salary gets taxed MORE than investment Capital gains..

I think it should all be equal tax across the board (total income * Rate) period, why are all these rules and tricks there to help the already well off people? (these tax avoidance strategies only works for people with large amounts of money) If someone just works one job one salary they get will tax whatever the rate is.

This Blog is interesting because it is about money, and everyone loves to talk about money and investments. System is rigged to the rich people though, and it won’t last forever if the advantage is continuously given to the rich.

#123 debtified on 12.31.14 at 1:21 pm

Happy New Year, Garth!

Thank you for another educational and rewarding year. I a looking forward for more in 2015.


#124 armpit on 12.31.14 at 1:24 pm

This strategy is okay with one thought in mind.

Be prepared to lose control of the money to the kids.

Anything else (returns to her) is a bonus.

There are so much senior abuse by the ingrate adult children….seriously.

I would like to see how this unfolds 10 years from now.

The road to hell is paved with good intentions.

#125 b on 12.31.14 at 1:46 pm

Fantastic blog; I learned something totally unknown to me. You also caused me to ponder how much I trust my kids. Have a great New Year, Garth.

#126 NoName on 12.31.14 at 1:51 pm

@#113 Rational Optimist

based on what evidence you can describe her children are the way you describe them?
How do you know that rest of readership have “unhealthy” relationship with their parents?
if i take my situation as an example, both of my parents passed away, so our relationship is in measuring terms ideal, because we can not disappoint or please each other.
estate planning you say.
…My question is…
This would send my taxable income to zero and allow me to claim the maximum from CPP etc…
…From what I have read, gifting between family members is tax free in Canada, so when I need the income from their TFSAs they should be able to withdraw it and give it back to me,.”..
…Essentially I am planning to give money to my children for them to invest tax free and they in turn will pay for my retirement…
…My question is: Is this legal?…

so dont be, blissfully ignorant to the obvious, you are the rational one.

#127 Cici on 12.31.14 at 2:03 pm

#115 Rational Optimist

This is greedy, if you didn’t catch it:

“and maybe that hardship cash called the GIS intended for the poor (making about $17,000 or less)”

Why should a millionaire be leeching into funds reserved for the poor?

CPP, yes she contributed. OAS is disputable, but NO, absolutely not, the GIS.

This is nothing to do with jealousy, so find a better argument please.

Anyways, if leeches like her continue her game, it’s a sure bet that TFSA rules will be changing soon; if not there will be no money for the social good and we’ll be back in Dicken’s times.

PS – I am not spoiled or jealous, have worked full time since my teens, do not have any debt, paid my own university and rent throughout my studies, and have never profited or depended on any social welfare, nor even dipped into unemployment insurance. So if you are going to resort to name calling, please at least get the names right.

#128 not 1st on 12.31.14 at 2:20 pm

The TFSA is just a way for the govt to start unloading its responsibility onto its citizens. If the CPP and OAS was such a great program, the TFSA wouldn’t even be needed.

This is just a subliminal message that says hey, we will be insolvent someday in the future and cannot take care of the fossils that voted for us, so start squirreling away your spare nickels now. O yeah and we promise not to tax it, that is unless you are too good of an investor and CRA has nothing better to do, then we will take a look and claw you back.

Corporation did this same thing about 20 years ago when they started converting people over to DC from DB and sold people that it was such a great change when it effectively let them off the hook and gave the employees no certainty as to their retirement.

#129 Mister Obvious on 12.31.14 at 2:29 pm

I saw Peter Mansbridge heading up the discussion on CBC’s “Bottom Line” last night. The four panelists include Patty Croft, Jim Stanford, Preet Banerjee, and Amanda Lang, all people with reasonable credentials, I’d say. As expected, they were asked to give some financial impressions on 2014 with a look ahead to 2015.

Croft & Stanford both strongly agreed that quantitative easing in the USA was a huge gamble that has paid off handsomely although there was never any guarantee that it would. Lang feels it has paid off thus far but the piper has yet to be paid, and Banerjee chimed in on residential housing which he thinks will defy gravity for yet another year before beginning an inevitable long descent.

But they were all solidly agreed on one thing: The USA is Canada’s biggest hope by far. We will ride the coattails of whatever further success the America can generate for herself in the years ahead.

That got me to thinking. Were the conservatives so crazy after all? After America went into the crapper we buoyed our economy with insanely low requirements for home ownership and easy credit. Then we spent several years building crappy condos and selling lattes to each other waiting for the USA to come back to life.

Did that actually happen just in time? Can we inflate ourselves back to a semblance of sanity before we must repeat the American experience for ourselves? I honestly have no idea but it’s interesting to ponder. I throw it open to the dawgs if any should care to comment.

#130 Cici on 12.31.14 at 2:37 pm

#74 4 AM Sunrise,

Me too, and thanks for posting the question.

Of all the fabulous responses, my favourite was from #159 Russ L. If he ever writes a book about his life with wife and sailboat, move over Smokey, because I’ll be the first to line up for that copy.

#131 omg the original on 12.31.14 at 2:51 pm

Additionally, you can’t leverage a TFSA directly. And the investments that can be put in a TFSA are limited to the rather narrow list of investments that the trustees and the government allow.

Narrow list? A self directed TFSA will allow you to buy pretty much everything a normal arm chair investor would want to buy. And you can buy some pretty exotic ETFs which normal investors should not buy.

Levering against long-term savings with options or commodities is just plain folly for almost all investors save the .001% that can make money off them.

The TFSA is designed for the 99% of savers out there not as a tax shelter for traders. The CRA is making this clear.

#132 omg the original on 12.31.14 at 2:57 pm

MoneySense had a TFSA Contest last year, the winner grew his TFSA to $300,000. See link below for all the winners
– complete with the names of all the contestants published!

I can only imagine the winner sitting at home waiting for that inevitable letter from the CRA.

#133 happity on 12.31.14 at 3:03 pm

Yup, it takes a certain person to get a bigger thrill out of more computer digits in a tfsa than Christmas.

#134 SWL1976 on 12.31.14 at 3:20 pm

Sounds like a lot of potential headaches for Anne and Co. from the CRA right down to sibling rivalries’ its all on a very slippery slope, and we all know which way shit runs in these scenarios.

2014 was personally my best YTD and hoping for another

Predictions, 2015 and beyond… Many people will have to face many tuff realities, which include…

Whoops I did buy my house right at the fat end of the market and prices don’t always go up

Construction jobs don’t last forever especially when oil is down

Harper’s ‘Economic Action Plan’ was a failure and he can now take all those stupid signs down

The USA is not going to ever pay back their debt; it is mathematically impossible. They may be chugging along fine for now, but really how much farther can this clunker really coast before the wheels really do fall off?

The world will begin to further loose faith in the USD and once more people realize that this paper currency is backed by nothing more than confidence and that confidence is nothing more than lies… Well things could unwind in a hurry

The world will begin to further realize that they have been pushed around by a Nation that holds about 20% of the worlds population, and of that 20% probably about 50% have lost faith in their own Nation and are beginning to realize how flawed the system really is

The ‘Conspiracy Theories’ that many people talk about are not really ‘Theories’ but they most certainly are ‘Conspiracy’s’

More people will realize that Russia is not the enemy, but just another Nation that wants to get on with doing business globally

Smoking Man will finish his book, but publishing will be delayed due to the backlog in proof reading work. They started with a team of just 10 and are now talking about TFW’s being needed to complete a project of this scale

Happy New Year’s to all and best wishes going forward in 2015

#135 Suede on 12.31.14 at 3:44 pm

#124 SWL1976

In late 2015 you will find out how high the US Dollar can go. Hope you have USD in your accounts…

#136 Dr Stan on 12.31.14 at 3:46 pm

The kids will want to top up their own TFSAs at some point and will find it full of Mom’s money. That could be problematic. The key to the TFSA is tax-free compound growth. If Mom takes out the income, that opportunity is gone. So there are attractive possibilities and some problems. Also note that close to $50K can be earned tax-free in the form of eligible dividends. That could be a good avenue for Mom. In that case, there are some difficulties with clawbacks of benefits, however.

No 116 Bottoms_up: The US withholding is 30%, but 15% if you file a W-8 BEN with your broker. Look things up before posting with caveats such as “I think”. In a TFSA, 15% of US dividend payments are withheld and not recoverable – gone forever. It’s OK for non-dividend payers.

#137 WHY PAY MORE on 12.31.14 at 3:48 pm

This sort of holistic, total tax planning is built on fealty, not law, and is only possible in a family possessing the sort of natural aristocracy of which the so-called middle class is not capable. The required bond is almost institutional, demonstrating a clan identity which transcends generations, countries, societies, and the whims of individual members in their various seasons of life.

Whether this scheme is fair or not is irrelevant; those who would benefit from it are not capable of it, and those who are capable of it have no need for it.

#138 45north on 12.31.14 at 4:03 pm

in Ottawa, on Bank Street between Heron and Walkley there are lots of loan joints. I’ve do think they’re a sign of bad times – and a cause.

Here’s David Reevely writing about loan joints:

The implication is that these places take poverty and turn it into dangerous desperation.

#139 tkid on 12.31.14 at 4:11 pm

#128, you are looking at things the wrong way around. If the coffers are empty, no one is getting a dime. The TFSA is a warning that relying on the government will make for a lean retirement. It was the same when companies went from DC to DB; they were actually saying the pensions were empty and relying on them will make for a lean retirement.

If I was starting out, I wouldn’t go contributory on my company’s pension, I’d squirrel those extra contributions away in my own accounts. There’s no use contributing to something that won’t exist when I go to retire.

#140 Mark on 12.31.14 at 4:14 pm

“The kids will want to top up their own TFSAs at some point and will find it full of Mom’s money. That could be problematic. The key to the TFSA is tax-free compound growth. If Mom takes out the income, that opportunity is gone.”

They could just give the money back to Mom, and tell her to invest it herself. If the money has grown, well, so will have the overall amount shelterable within the TFSA.

Of course, one risk is that “Mom’s” money goes down in value (ie: she bought junior gold stocks 3 years ago that are now 90-95% discounted), destroying TFSA room.

An even better idea, IMHO, is to convince the grand-moms and dads to put the under-aged grandchildren in their wills. The money flows, without attribution, into the childrens’ hands, and since their taxable income is negligible, it is mostly un-taxed.

#141 Casual Observer on 12.31.14 at 4:17 pm

“And the investments that can be put in a TFSA are limited to the rather narrow list of investments that the trustees and the government allow.”

I’ve long argued that writing put options should be allowed in registered accounts – as long as they are “covered” by the cash required to buy the shares if forced to.

This is no different than having an open “limit” buy order.

#142 Bottoms_Up on 12.31.14 at 4:27 pm

#136 Dr Stan on 12.31.14 at 3:46 pm
Actually I was 100% accurate in my assessment that you can decrease the tax withheld on dividends by 50%. The numbers I chose were an example, and that’s why I prefaced them with a ‘caveat’. That’s what caveats are for, to allow an ‘out’ when you know you don’t know. I knew I didn’t know. If everyone lived by your rules, there would be no such thing as a caveat….vidiot.

#143 Almost A Boomer on 12.31.14 at 4:38 pm

Happy New Year Everyone.

To each their own but I think Ann will regret this.

It isn’t just her kids that she needs to be concerned about but their future partners. There is nothing to stop one or all of them from removing the funds or naming their partner as beneficiary.

#144 Jon on 12.31.14 at 4:44 pm

One issue I see is this strategy uses up one’s kids’ TFSA contribution potential. What if your adult children want to contribute their own down the road? Suppose they start making a lot of money in 5 years and wish to top it off and max out contributions… if they used up their contributions for 5 years with parents’ money, aren’t the kids out of luck?

On another note, if Canada ever wished to increase population growth, make TFSA’s possible for minor children too… then parents can really make bank starting as soon as they’re born.

#145 Mark on 12.31.14 at 5:06 pm

“On another note, if Canada ever wished to increase population growth, make TFSA’s possible for minor children too… then parents can really make bank starting as soon as they’re born.”

Like that would actually help any. As it stands, the young have very little money in Canada, and very poor job prospects at the moment. Even very highly skilled positions in fields like engineering are getting hundreds of very qualified applicants. The RESP achieves the equivalent anyways (most RESP money doesn’t get taxed upon withdrawal), so I don’t see what the point would be.

As it stands, investors in long-term buy and hold equity strategies can achieve effective tax rates in the 10% range simply through the deferral mechanism inherent to capital gains taxation. Dividends are tax-free up to $50-$60k, and then at a fairly low rate thereafter. Interest on money borrowed to invest is fully tax deductible. If anything, the TFSA and RRSPs damage the Canadian economy by reducing the propensity of investors to invest in equity — the foundation of business formation.

#146 Mark on 12.31.14 at 5:11 pm

“I’ve long argued that writing put options should be allowed in registered accounts – as long as they are “covered” by the cash required to buy the shares if forced to.”</b.

I agree, and that goes along with my theme that the rules, and the requirements for trusteeship on RRSP accounts are unduly restrictive and reduce economic flexibility and movement of capital.

After all, you can buy junior mining stocks in RRSPs. You can buy call options that are likely to expire worthless. So if a person wants to, they can blow their brains out on risk. But heaven forbid, if someone wants to use their RRSP to buy an income property at the bottom of the market (not right now, of course, but maybe in 10 years!), that's forbidden. Or invest in their brother-in-law's Tim Hortons franchise equity down-payment. Etc.

I personally believe the government should be phasing out the RRSP, the RPP's, RESPs, and the TFSA, and addressing the reason why these 'shelters' were even needed in the first place.

#147 espressobob on 12.31.14 at 5:14 pm

#68 Fred Smith

Where are you getting 7% in a low risk ETF?

The idea is a diversified global portfolio. Canadian, US, International & Emerging market exposure along with a weighting in bonds can easily provide 7% annually. That’s not a constant, but a mean average over time.

Oil stocks & sector plays? Yikes.

#148 Obvious Truth on 12.31.14 at 5:25 pm

From what I’m reading today people would rather contribute to their own tfsa than have someone do it for them.

It’s gifted folks. There is no downside. It belongs to the kids. It’s a win win. I’m sure mom won’t need all the money yearly.

There are other things they can do with their money.

#149 TurnerNation on 12.31.14 at 5:30 pm

Last in 2014?

#150 NoName on 12.31.14 at 5:58 pm

#148 Obvious Truth

obviously you are the gifted one…

#151 Smoking Man on 12.31.14 at 6:21 pm

#130 Cici on 12.31.14 at 2:37 pm
#74 4 AM Sunrise,

Me too, and thanks for posting the question.

Of all the fabulous responses, my favourite was from #159 Russ L. If he ever writes a book about his life with wife and sailboat, move over Smokey, because I’ll be the first to line up for that copy.

Ya that sounds like a winner.. Me, my wife and my boat..

“The sea was calm, the golden day break made my wife smile. The sun shined off the leather of my steering wheel…honey I’m so glad you’re with me, I love you. ”



Stoned Aliens in Las Vegas…strip joints, Gambling, Space ship rides, and death rays..

Happy New Year Dogs…

#152 cmj on 12.31.14 at 6:21 pm

I think it’s unethical what she wants to do with TFSAs. She isn’t gifting. It is a manipulation to lower her taxes and therefore collect more government money decades later (taxpayers’ hard earned money)

This scheme won’t work to her favor in the long run because she needs to trust her own 3 kids and their spouses for investing properly and giving her the money when she needs it. This would be 20+ years from now.
She’d need a hail mary with too many variables in play.

It also doesn’t allow her kids to save in their own TFSAs. Bottom line, she’s not being a great role model to her kids through this outright deception.

#153 boonerator on 12.31.14 at 7:45 pm

#68 Fred Smith

Where are you getting 7% in a low risk ETF?

RBC has an income fund that paid 7% in 2014 and will be close to that in 2015, my capital has about a 3% drop since September.

On the kids and TFSA….

Our Dad lent us money when we were adults, 0% interest but fully documented as to repayment terms.
Good lesson

#154 maxx on 12.31.14 at 9:03 pm

Asked [email protected] what she thought of the possibility of 10K for TFSA annual contributions come 2016. Her immediate response: “people are taking money OUT of their TFSAs!

If only people would realize how precious money actually is now….and more so going forward.

#155 TFSAlover on 01.01.15 at 2:03 am

Great post, Garth. Too many people think that the easy way to avoid paying taxes is to “gift” money. The problem is that the pesky family members who’ve received these gifts, actually want to keep them! Who would have thought?!